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Thursday, April 12, 2012

SPX Update: Looks About Right So Far...

Tuesday held no surprises as the market did a ramp and camp, which fits the terms of the technical bounce discussed yesterday.

Toward the close, I wrestled a bit with the wave structure, but in the end decided it appeared a little more likely that the rally would carry forward in at least one more leg. It does remain plausible that the fourth wave completed yesterday as part of an expanded flat, but that's the alternate count. I don't think it's entirely clear-cut, and I would say I'm split maybe 60/40 on the odds between the two short term counts. Any print above yesterday's high would rule out this alternate.

The short term SPX chart is below. Theres been no material change in this chart since yesterday, but we now have a more accurate "perfect world" target for wave c of 4, at 1384. Support/resistance levels are shown in black, and the rally stopped right at 1375 resistance yesterday.

If for some reason the rally can't make it back up to the blue target box (it doesn't have to get there tomorrow -- I'm speaking more in general), then that would (obviously) be bearish and could indicate that this count is too conservative. Yesterday's "aesthetic chart" covers that possibility in more detail, but I'll worry about that more only if I need to.

The larger degree alternate count (black) shown above considers the possibility that wave (i) has bottomed. Bears want to remain cautious if the bounce is stronger than expected, as possible warning that one of the alternate counts may be unfolding. Ideally, if this is a fourth wave, it should not sustain trade above 1388.

What bothers me a little bit for the preferred view is the huge gap from 1398. This gives the bulls, and the market makers, something to aim for -- so do remain aware of the larger second wave potential, and if momentum seems to be increasing and 1388 can't contain, then bears may want to hold onto their wallets until 1398 or so.

We're also still watching the big picture alternate count (below). On the upside, 1398-1400 is currently the level to watch for clues about this possibility. Closes north of 1398 would be bullish; conversely, a clean rejection at that level could kick off the next big drop.

A few of the reasons I'm not currently favoring the big picture alternate count are shown below. NYA and INDU look particularly weak, and have both broken their March lows.

In conclusion, yesterday's bounce was as expected, and another leg up of roughly equal length would fit the terms of the preferred count. After we have some more solid indication of where the assumed wave 4 has topped, we'll calculate some targets for the next wave down. In the meantime, there are several levels for bears to watch which could give warning that one of the alternate counts was in play. Trade safe.

Just bringing this correction forward to a wider audience. I'm sorry about the error in targeting. Hate when these things slip through.

Good luck and good trading!

whip

==========================================================================================From yesterday's post...While going through PL's counts for S&P, I found an error in the countingWaves Excel workbook that I published earlier It was in the Wv.4 targets (the validation rules are correct). Here is the corrected version: http://www.mediafire.com/?2oji... As an introduction to anyone that didn't see the original posting, here's a short description (from the original post): "Here's something I've been working on to help learn EWT. This is a macro-enabled Excel workbook that validates a simple impulsive wave followed by a corrective wave. It doesn't identify waves but it does validate them against the most basic rules. For instance, if you enter a Wv. 3 that is shorter than Wv 1 and Wv. 5, the workbook will call it out. The specific rules and the sources are listed on the 'directions' worksheet. It also identifies likely targets for waves proceeding from wave 2. Since Disqus can't handle non-image types of files, I opened an account at MediaFire (recommended by LifeHacker). Media Fire scans all attachments for viruses"Have a good night!whip

CVX put options:I have monitored the put options on CVX from April 2 thru to yesterdays close. I was anxious to see which strike price performed the best with the expectation that CVX would decline to $100.

The one aspect that bothered me all day yesterday is shown in PL's first chart. Leg 3 is the shortest in both the S&P and Russell. In the NDX it looks like something completely different, perhaps wave 1 of 3. So as is often the case, when I try to figure out EWT I get confused. I am confused. Therefore I am.

excellent PL, clear and concise. If we go up to 1384s, the bulls think all is peachy again, and the bears have all but 1 -you- run for cover and then booooom: down and screw you all. marvelous concept!

I see you've had your aluminum foil out again. Nice spreadsheet. In case you didn't see it, go back to the last thread and look at PL's explanation of how he achieved a 1000% return trading puts on CVX.

Hello Runner....thanks for bringing that to mind. I did catch his analysis, this was geared more towards us worker bee's who have day/night jobs/careers. Who says "buy and hold" is dead! Event time @ 3:30 PM on CVX (based on fib ratios)

Possible fib retracements from the 847.92 high. 38.20% 808.14 - 50% 815.74 - 61.8% 823.33. I think 823 is possible but not today, imo. that would make a nice RS and setup the H&S pattern very nicely. Anyway today maybe 808 but I doubt it. Not trading advice.

This move higher in the Russell is definitely an impressive little impulse. Mind you, it "should be" whether it's a 'c' wave or something more aggressive. Lots of volume behind it though. I still think there's a good chance for a huge disappointment tomorrow when JPM reports earnings an hour before the markets open. Bloomberg says their earning should be good, therefore it's a short IMHO.

Thanks for sharing Max. Are you familiar with Phil Davis of Phil's Stock World? I was surprised to have seen him quote some of my work one time on his website and on SA so I started investigating a little more into what he was all about. I knew of him but only by his articles. I discovered that he's a master at options strategies and man, does he come up with some doozies (winners). Still, they're not as aggressive as our man PL did the other day, but they're still very interesting and something I plan on getting more into. In any case, his website is a subscription based affair but often he publishes his articles on SA where they're free of course. So you can find his website here. Or follow him on SA here. It would probably be worth your while to at least check him out since you're doing spreads.

SLV sky up, since that over night sell off on 03.04. it seamed some ppl where just looking for the lower entry. As Nenner said in the last interview posted here, Gold and Silver sent out early buy signals, so entry prices needed to be lower...anyways i stay away, I burned my fingers there...

I'm thinking they will disappoint too but in all honesty it's just because I hate their guts with a passion. With a capital 'P'. But it's the timing of their release... an hour before the market opens... on a Friday? I dunno man, I just hate those crooks with so much enthusiasm that I might not be thinking clearly, lol. It's all about the wave patterns and TA really... that's where the real clues come from and we'll just have to see how today ends. But I'm betting that it ends with a very clear 'abc' correction upwards that flows really well with this initial drop down off the Apr. 2 high. I got long the Russell just at the right time and am really enjoying this little pump job today. I was expecting it obviously but I don't trust it as being a new bull cycle. My mind is open though. No, I'm not talking "sieve", lol.

That's what I'm suspicious of too. But it seems way too early for it to complete. I'm really convinced that they're going to pump this puppy as far as they can before GOOG and JPM report tomorrow. Not sure when GOOG reports, but JPM is in the morning.

Lately the RUT has been setting up some very nice IHS and H&S patterns. I like that fib number at 61.8 off the 783.56 low. Plus that hit and bounced on a TL from the 785 bottom. The weekly chart is setting up the same. So here is what the magic 8 ball is saying for July = 600. Just my meesing with patterns is all and this is PURE specualtion. Nothing to trade for.

It seems to me that the gap is absolutely the target. I'm thinking 815ish. IWM also shows a real air pocket just above which should mean "clear sailing" just as it would mean "slice right through" if it's falling. So I think the road is clear for about 814-815.

So true AR. I hope it stops short of that. Once again I should not read the news and only trade what I see. Appreciate your point there as I did not look at that. Thanks again AR. What happened to the Flames and Oilers? What is up with the Canucks? Hey who did Tim Horton play for?

For those trading anything RUT related, I just bailed out of longs for the simple reason that the current count seems to be a clear 5 and it's stalled right at the underside of the gap. Maybe it goes higher as I speculated only minutes ago but something tells me it's getting toppy. Just a hunch that it was time to take some green off the table and relax.

I was thinking that the real reason for the recent lower foreclosure actions is too keep "good" assets in appearance for the quarter, but in actuality the picture isn't so rosy. PL's EW and the fibs are holding up well. I'm actually suspecting that it's slightly possible I might be getting better at this "Financial Frogger", thanks to all of the folks here. But I currently don't have any skin in the game. The wounds are still healing :)

PL's 3/18 posting on CVX pointed to CVX putting in a 5th wave top. Mar Jun Sep Dec cycles tend to be the most traded (liquidity & volatility) chose the next cycle to avoid big premiums. June options would catch the "sell in May and go away"(if it happened) $100 was the expected target. "Ending Diagonals almost always return to where they began. Often the mark even larger trend changes"..direct quote from the 3/18 posting. CVX started the diagonal at $85. Could I catch all of the drop?Nenner was calling for a market peak on 4/19, so I couldn't go any shorter. Going against PL and to a lesser extent Nenner is like pulling on supermans cape.

That's my suspicion. I know I speculated that RUT would keep heading higher to fill the gap but at the moment it just looks like such a perfect 'abc' that's completing that I just had to bail. I'm not really seeing any sell signals from the momo indicators yet but it got so darned far above moving averages that usually that's a good time to take some profits too. And then just sit back and let the market 'show us' what it plans to do. That's my kind of thinking these days anyway... a little more cautious.

1382.6 is the 38.2% retracement from the 1422 high and 1383.5 is the 38.2% retrace from the 1425 high. All close to 1384.4. I wonder if that's wave 4 done? Actually, at those levels I guess it's theoretically possible that we've just had the top of wave 2?

It may be a little late now but I was targeting 804-807 as the 'top' for the end of 'c'.Reasons: 1) Wave 4s typically ends within the price territory of the fourth wave of the preceeding wave 3 (801-807).2) A common retracement of wave 4s is 38% of wave 3 (804).3) Given the A=C relationship of PL's S&P target, I opted for the upper 1/2 of the range given by 1) and 2).Sorry for the late post...only post during lunch [going early today :)]

I hope I'm not misleading you in any way bud. I don't know where the market is going with any certainty. In fact I've got such a bearish soul that I felt I was nuts to have been long IWM to begin with. But it paid off very well to just ignore my bias and go long when my indicators told me to. But I can hardly stand the heat when I'm long, you know? lol

I'm looking to get short because on the larger picture I believe we're in a bear now. On the other hand, as PL pointed out yesterday the McClellan Oscillator (NYMO) was way down there in a dangerous zone suggesting a bounce. Well we've got that bounce now but I'm not sure it's finished. But dang, it sure does look like a near-perfect 'abc' correction higher right about now. Might be time to ease into shorts pretty quick here. I was anticipating not getting the opportunity until much later today.

Flames and Oilers pretty much sh$t the bed this year, lol. I like the Canucks too though. I think they'll be fairly tough although they're down one game. I don't follow it much these days, especially after so many years of the Flames being pretty weak.

Oh man... Tim Horton was a stud. What a player. Tough as hell and a superb defenseman. He was so strong that when he got into a fight he'd put the other guy in a bear hug and break his ribs sometimes, lol. He was squeezing Derek Sanderson so hard one time that his ribs started cracking and the only way Sanderson could get out of it was to bite Horton. So that's what he did, lol.

What a sad thing that he died way too young in a car crash. He played for Toronto mainly. That's where his fame really started to grow but he ended up with Buffalo.

It's a *huge* kickstart to follow someone who's decent at it -- I followed a pretty pricy pay subscription guy (nobody anyone's heard of, most likely) many years ago, and that helped immensely at the beginning. You almost have to see it in action and being practiced by someone who understand it to really wrap your head around it.

His updates never explained anything, though, they just showed charts and targets -- but even that was a big help early on. I think a lot of people like keeping it "magic" and intentionally avoid educating their readers... maybe that makes more business sense, since you don't necessarily want your subscribers to not "need" you any more. I made the decision early on to attempt to educate along with the charts.

Anyway, bottom line is: I have no idea how many hours I have into it -- but it's a lot. 10k hours might cover just my time investment over the last week, lol.

Thank you very much for taking the time to reply. You really do share your knowledge in a way that is digestible to the reader. Your site has definitely been a "kick start" for me. I just have to put some fresh gas in the tank. :) You have a place in heaven, whereas I on the other hand will be fighting with AR over who gets to ride shotgun on the "other" bus...lol. Just be sure to get some well-deserved rest sometime.

Thanks...Yeah, been extremely loaded with day job. Also, I've been trying to save time to get more studying done, as my skill needs so much improving. Currently, I'm studying volatility analysis, which is extremely interesting. Reading this ebook "Macro to Micro Volatility Trading" ( http://www.amazon.com/Macro-Micro-Volatility-Trading-ebook/dp/B005PDSLKI/ref=sr_1_1?ie=UTF8&qid=1334247354&sr=8-1) which costs $2.99 and is worth it's weight in gold if it were paperback. After this, I have to read "the" wave book. Millions of other things to do also. -DD

To you as well my friend. I hope you know you're more than welcome to rejoin to good ones who now comment at my own place now? The king troll has been banned from there from day one and he was banned from this site yesterday. I hang out here and at home, both.

Missed an 11% move in DUST this morning (so far) because I was working on something for a customer at my real job. Those damned customers, I wish they'd just GO AWAY!!!

I am really close to matching my "earned" income by trading part time. The thought of focusing exclusively on trading is looking REALLY attractive right now. I would love to hear from any of you who have made this leap of faith.

Lol, those hollywood lines. But for sure, this is real serious business underneath. That ebook, it is amazing. I've been studying it word by word, chart annotation by chart annotation. I'm half way through at this point. From what you'll learn, you'll be able to step through the time frames and they will tell you a story of where the prices come from and where they're likely headed. A real eye-opener. And then if you get good at EW, you'll be unstoppable. -DD

My recommendation is to keep your job / career and use your limited time to cherry pick only the best trading opportunities if/when they become available. If you miss one, there will always be another down the road, but you will continue to have your steady and reliable income. My 2 cents...

Your job will also keep off the pressure to "always be doing something in the market" in order to make income. You will be able to sit out bad or difficult/unpredictable trading environments comfortably.

bot an hour ago 200 tza 200 soxs 200 bgz and 200 faz small allocations will add more if we rally to spx 1390 to 1400........will also add here if PL has it basically on the nose....as he does many ttimes

LOL...What actually happened is I went kinda agnostic with underlying ursine tendencies. I have to understand and trade what I see, not what I wish to be...I HAVE SEEN THE LIGHT...can I get an amen...I do like dancing bears though (every day of the week.)

Just a heads up that the AAPL:NDX ratio is failing badly today. When that thing rolls over, the NDX is absolutely toast. It's not a confirmed breakdown yet but it's sure as heck not a bullish signal for such a bullish day. Charts are available in the article, here. If you're short of time, the most important one can be seen here. As you can see, it's far from being confirmed but as I mentioned, this is a very bearish occurrence for such a bullish day. Heads up!

Forget ES, DX, NQ and all the rest. From now on, I'm only trading CVX! Got long at 101.30 this morning, and just sold it all at 102.70. Could be a little more upside there, but Imma take the money and run.

Just a heads up that the AAPL:NDX ratio is failing badly today. When that thing rolls over, the NDX is absolutely toast. It's not a confirmed breakdown yet but it's sure as heck not a bullish signal for such a bullish day. Charts are available in the article, here. If you're short of time, the most important one can be seen here. As you can see, it's far from being confirmed but as I mentioned, this is a very bearish occurrence for such a bullish day. Heads up!

Damn... I just posted what I think is perhaps a rather important notice about the AAPL:NDX ratio failing badly today and it ended up in the spam bin. There's no way I can post links for you. If PL can rescue it, great. Other than that... wait, I'll try to add the links below.

Question for whoever would be kind enough to answer. The 1388 level that we are watching, does that # come from the turn at 1387.34 and is that why it is significant and/or b/c it puts us into that gap down zone from April 9th? In short how is that 1388 number arrived at? Thanks for any insight you can provide.

Look at PL's first chart today. If Blue 3 is correcting today then no higher than low of wave 1 EW rule. 50% retracement is 1385.68 and 62% retracement is 1392.36. If we breach the 1392.36 then Black 5 is in.

Authentic made some good observations. Your day job put somr structure into your day. It may seem constricting at times but not everybody can function properly in an unstructured environment - you can make your "work from home" a 24 hour thing.As Authentic says, see how you feel after an unfavourable run. sometimes we have to be bold and go foe what we wan't. But look carefully before you leap.

How soon I forget...I'm gonna ride that bull baby...Ben won't let me down...lol...I'm signing up for some "...bull clinic" right now...here's the flyer for it in case anyone else is interested....Bulls rule!!!

Thank you kindly Bob_E. I've been pouring over the chart and understand the W1 rule, but I saw that on the chart as 1392, but I see what you are saying about being 1/2 between the retracements and that low, etc. Thanks again for helping a brother out!

Great advice...always have more than one source of income if possible....cuz one of them might go south on you. Of course when the proverbial lockbox gets stuffed with money from one source or the other, you can always become a maverick. I plan on opening a school for low-income, inner-city kids...really...that's my goal.

38% retracement of this third wave would be $103.50 approx, about a buck away from here. If PL's out on the long, then it's time to start looking at puts. Keep in mind the wave two correction appears simple...which then by the rule of alternation suggests this wave four will be complex. Scaling in here up to $103.50 is a low risk trade. Wave 5 down coming soon to a theatre near you.

No...No it doesn't. I walk around most of the time with same amount of sleep as you get, and I really do find uninterrupted sleep one of the finer things in life at this point. Money never sleeps, and neither do I anymore.

Just a heads up that the AAPL:NDX ratio is failing badly today. When that thing rolls over, the NDX is absolutely toast. It's not a confirmed breakdown yet but it's sure as heck not a bullish signal for such a bullish day. Charts are available in the article, here. If you're short of time, the most important one can be seen here. As you can see, it's far from being confirmed but as I mentioned, this is a very bearish occurrence for such a bullish day. Heads up!

Runner...there is a big picture here that's truly thrilling. CVX has completed a fifth and final wave high at $112.28. According to EW rules we should expect a correction lasting longer and deeper than the most recent one which was from about $107 to $85. Couple that with what is happening in this current decline that we are in. Wave 1 down equals $7.43, wave 3 down equals $8.28...no extended waves yet in this series....that suggest that wave 5 down, soon to be upon us, should/could/would be an extended wave 5. So this next drop could be from right here at $103, down to $85 and in a hurry. Once there....extended waves ahve this fascinating aspect of "double retracement". The A wave correction (after 5 down) could retrace right back up to wave two within five down, and then drop right back down to $85 where it began. talk about taking candy from a baby! Gotta watch PL real close on this stock. It could be diamond in the rough.

I'm gonna make sure they can all read and write first, then some math and sciences, the arts...then trading. Actually not a bad idea...There are a lot of *really* bright kids who at this point, don't have much of a chance at ever getting out of the ghetto. I met one of my wife's students who could be "king of the world" if he can just keep his nose clean (and wait until he's at least 30 to have a kid.)

Sounds like good advice. I know I'll prolly jump ship and trade full-time at some point. It is truly my passion and I love the endless stream of knowledge and experience (from this site and other sources). Honestly, I spend at least 40 hours per week on this stuff anyway (mostly nights and weekends), so I figure I could cut my hours by more than half by quitting my day job and would likely not give up any income.

I have been trading part time for 20 years and have developed a very reliable buy/hold/sell system over the past few years. 74% winning percentage on trades and my average winner is 4.4 times greater than my average loser. As far as "living through a losing streak" goes: been there, done that. Lost nearly half a MIL back in 2000-2001 (see recent post). That was no fun at all and I learned a huge lesson in cutting losses and not swimming against the current.

CVX...3:30 PM event via fib time ratios for CVX appears to be pointing to a high. Previous event time was 4/2 at 3:30 PM a high. I have no confidence, no real long term experience in this time fib relationship...but I'll keep it up on CVX.

My apologies PL. I responded without even looking at who the query was from. In my response I was quoting you to you. Not sure what happened, but I did a reboot. I'm placing the dunce cap on top of the aluminum foil.

Gold must prove this rally is for real by breaking thru this 1680 level convincingly and with some solid overnight buying, especially with China announcement tonight. With that in mind, I'm short gold here along with copper/gold miners and emerging markets to boot. Took small positions, but the setup is there IMH "often wrong"O

For what it's worth: AAPL now posted it's 3rd RED candle in a row, and closed below it's 10d-SMA. The first fact hasn't happened since it's January 25 rally. The 2nd fact has only happened once since then (march 30)...

I do remember reading your previous post on the subject. It sounds like you have a system and plan. Therefore I think the key is to establish a savings account that can support you and your family for 3 years without earning a dime. That account would have to be separate from your trading account and capital and they can not be mixed. Finally, I think you have to time when you that VERY CAREFULLY. An ideal time would be when the market is at a five or ten year low (think March, 2009), rather than when a market is near or making new highs. That would put a steady wind at your back to help you succeed.

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